Baroness Nicky Morgan has warned the only way to reduce the growing Financial Services Compensation Scheme levy is to prevent the spread of investment scams and unauthorised firms in the market.
Speaking at a virtual conference hosted by the Personal Investment Management & Financial Advice Association yesterday (June 3) Baroness Morgan said she understood industry concerns surrounding the levy, which had increased to £649m for the 2020/21 year.
The levy to be shouldered by advisers in the coming year has increased by £16m to £229m, but the former chairwoman of the Treasury select committee said the only way to slow this increase, and even reverse it, was to prevent unauthorised firms and scams in the market.
Baroness Morgan said: "I understand the concerns about the levy. Overall from my time chairing the Treasury select committee and quizzing the FCA I think there is a real desire to support the industry and the sector, but also to clamp down on behaviours that are not helpful and protect customers.
"Looking at the levy on its own, the difficulty of the crisis is of course people have to switch attention and teams to deal with that rather than perhaps looking at the way in which the system works.
"The only way ultimately to keep the levy on an even keel, or to potentially bring it down, is to prevent the scams and unauthorised firms being able to take investments in the first place."
The former Conservative MP said achieving this would also require increased access to financial education as consumers become increasingly responsible for their own pension pots.
Advisers saw their FSCS bill rise this year predominately as a result of an extra £44m set aside by the lifeboat body to meet claims for misleading advice against the collapsed mini-bond provider London Capital & Finance.
But advisers have since warned this could place "extreme pressure" on their industry, especially in light of the financial challenges presented by the coronavirus pandemic.
Baroness Morgan said: "The levies are critical in giving people confidence about the financial services sector, and in particular knowing their deposits and investments up to a certain amount are protected is absolutely vital in underpinning people making those investments in the first place.
"But I do think the regulatory boundary has to be looked at all the time. At what point do regulators intervene and at what point do we as individuals take responsibility for our actions?"
Read our investigative piece: How the pension scammers are getting away with it
Tim Fassam, director of government relations and policy at Pimfa, warned of increasing concern that entering a crisis, such as the coronavirus outbreak, could see a higher degree of firm failure and subsequently an increased FSCS levy.
Earlier this year the trade body reported its member firms were blaming "ongoing failure" at the regulator for compensation claims against the industry that "could have been avoided".